Government should send “price signals” on energy?

posted at 8:30 am on November 1, 2008 by Ed Morrissey

Just in case voters didn’t figure out Barack Obama’s economic instincts towards statism, this interview from 2007 on energy policy should open a few eyes. During the Democratic primaries, Obama had a lot more openness about his desire for top-down control of the economy, especially when it came to energy. In order to change the behavior of consumers, Obama argued, the government had to send “price signals” to deter bad decisionmaking … at least according to the Bureau of Acceptable Consumer Choices:

Q: How do you convince people to change their lifestyles, to live differently, or to turn the question on its ear, are voters ahead of the politicians on this stuff? Do they get it, and maybe the politicians don’t?

A: Well, I think, uh, I think voters do understand it. I think it is important for us to send some price signals to change behavior.

Is that the function of government — to fix prices as a punitive measure to change consumer behavior? It will be in an Obama administration. He and a few elites will decide which consumer behaviors are bad, and penalize it with price signals. That usually means taxes or tariffs that drive the cost upwards. I’d guess that Obama isn’t celebrating the fact that a gallon of gasoline will likely fall below $2 per gallon sometime this week.

When have we seen government send “price signals to change behavior” before? Oh, yes — in the lending markets. When government wanted more loans given to risky borrowers for political purposes, they sent “price signals” to lenders by having Fannie Mae and Freddie Mac buy up tons of subprime paper, and then mandated their conversion to securities to send “price signals” to investors. How did those “price signals” work out for taxpayers, consumers, and investors?

We’ve already had enough “price signals” from government to last a lifetime. We need government to get out of the “price signals” business and get back to normal regulation. Barack Obama revealed himself in this interview as the kind of politician who wants to manipulate markets for his own political ends, and is clueless about how disastrous those actions will prove.

Obama’s “price signals”, especially in the energy sector, will probably turn a moderate term recession into a near depression, from which recovery will be long and hard. His “price signals” will subsidize inefficient sources of energy at the expense of efficient ones, and the ripple effect of vastly higher energy prices will drag down the economy indefinitely.

Hmmm, the “chosen one” doesn’t seem to have any compunction about interfering with the free enterprise system. That sure
scares the hell out of me!

GFW on November 1, 2008 at 8:38 AM

It’s scary to normal thinking people but the vast majority who support Obama are too stupid to know what the free enterprise system is or how it works. All they care about is Obama paying their mortgages and their gasoline bills.

It’s scary to normal thinking people but the vast majority who support Obama are too stupid to know what the free enterprise system is or how it works. All they care about is Obama paying their mortgages and their gasoline bills.

And THAT, my friend, is reallly America’s chickens comeing home to roost. We have now created at least two generations of citizens who have no concept as to how an economy works, because they have been trained to trust government for their needs.

How did those “price signals” work out for taxpayers, consumers, and investors?

The price signals were an irritant, but what blew up the system and caused the collapse of our financial industry was weak regulation allowing too much leverage and too little transparency, awful risk management by private firms like Bear and Lehman, and negligent attention by the credit rating agencies like Moodys.

Is that why he is raising taxes on the rich? to send a “price signal” that you shouldn’t be rich? Is that why he wants to raise the capital gains tax? to send a price signal that investing is bad? Is that why he wants to raise corporate taxes? to send a price signal that productivity is bad?

Will the middle class sit in the dark and send tax rebates to the power companies? Won’t they send their tax dollars to the government, who then doles it out to the “poor” and those on “fixed-incomes” – which Obama defines as “families” at Barack the Wealth Spreaders’ website:

Obama and Biden will enact a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills. This relief would be a down payment on the Obama-Biden long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief.

Basically, Barry will make $5 gas the law. Nancy Pelosi has refused to do a damn thing to lower prices, she’s completely invested in high prices,like Obama, ostensibly for ‘environmental concerns,’ but mostly to pay off the greens and to make a killing for herself and patrons in ‘alternative energy’ that can’t compete in a free market.

And how much money could foreign oil cartels have dumped into Barry’s pockets this election through his open-door, no-questions, credit card policies?

We have now created at least two generations of citizens who have no concept as to how an economy works, because they have been trained to trust government for their needs.

MikeA on November 1, 2008 at 8:55 AM

The current generation of Wall Street CEO’s along with Alan Greenspan aren’t a great advertisement for running a successful economy. When the Goldman CEO Hank Paulson petitioned the SEC in 2000 to allow Wall Street firms to self-regulate on leverage levels and then 8 years later as Treasury Secretary Paulson asks the taxpayer for $700B because Wall Street firms like Bear, Merrill, and Lehman all failed to manage risk it isn’t an advertisement for laissez faire capitalism.

This is precisely why he didn’t think gas prices were actually high ENOUGH, last summer.
He bemoaned that he’d rather they’d increased a bit more slowly, is all.
His ultimate goal is NOT simply independence from foreign sources, but total elimination of the nation’s dependence oil and gas, completely… the higher the prices, the less we’ll depend on it. (price signals, to control behavior) ARRGGHH.
Those EEEEEEVIL oil companies, y’know.
Way too selfish, those guys… sigh.

Why doesn’t he just cut to the chase… require us all to carry “our papers”, which would consist of photo ID and a certified copy of our most recent tax return. Then he can just have two prices for everything… “rich” and “middle class” (everyone else gets whatever the good or service is for free). Anyone identified as a “party official” doesn’t need papers and along with getting the product for free, the seller must also pay them the “rich” price for using the product….. sort of a Gorelick or Raines arrangement for the party official masses.

From a cursory bit of Googling, it appears that the term “price signals” is fairly obscure, which indicates he probably learned it from a Marxist professor or one of his idiot economic advisors. I did find this fabulous analysis of what happens when the government tries to impose them, as Barry has would do, here:

Think of it this way. You are into your fourth hour of filibuster and ask a staffer to get you some water which you very much need. A couple minutes later, she returns to tell you that the usual “onshore traditional basins” vending machine is very nearly sold out and there were several dozen other staffers milling around trying to get their coins in the machine, i.e. she couldn’t get you any water. You respond by suggesting trying another vending machine in a different location. A few minutes later, the staffer returns to inform you that while she believes the vending machine on the second floor “offshore Florida” has plenty of water, the elevators and stairs to the second floor have all been sealed off. Getting ever thirstier, you suggest the other side of the building on the same floor, perhaps that vending machine will have some bottled water. After a lengthy time, the staffer returns and tells you that yes, there is bottled water at the “Federal lands vending machine”, she even saw it, but she still has no bottled water for you. It seems someone has put a turnstile in the way that will cost more than the change originally budgeted for bottled water. In addition, there is an individual that won’t allow her to step up to the turn stile without a written 30-page essay of why she wants the water.

Finally, in exasperation and nearly hoarse needing some water during your filibuster, you hand your staffer significant additional change and suggest going to the vending machine in the basement “deep gas” or next door “outer continental shelf,” but please bring back some water.

Unfortunately, she returns to explain that while there was bottled water at either of those two vending machines and although they were more expensive, she did have the necessary change, but there was a new problem. It seems a gruff, masked figure stepped out of the shadows and took the change, telling the staffer that he had a better use for it than buying bottled water.

Congress must decide its proper role. One choice is a free market response to remove impediments to oil and gas supply so that the increased funds and increased drilling can in time bring new supplies of oil and gas and lower prices and lower inflation and assist economic growth. The other choice is to “mug the staffer” (windfall profit tax) so that there is no bottled water(oil and gas).

The price signals were an irritant, but what blew up the system and caused the collapse of our financial industry was weak regulation allowing too much leverage and too little transparency, awful risk management by private firms like Bear and Lehman, and negligent attention by the credit rating agencies like Moodys.

dedalus on November 1, 2008 at 8:58 AM

A few trillion dollars in mortgage loans to deadbeats was just an “irritant” that never would have caused a ripple in the economy . . . yeah, right. The “awful risk management” happened because the banks believed there was no real “risk” to the crappy mortgages they were leveraging because US taxpayer dollars would be used to back up those worthless mortgage contracts, thanks to idiotic “social justice” government policies pushed by Dims like Barney Frank, Chris Dodd, and Barack Obama (because hey, it’s just not “fair” that everybody can’t own their own home).

Communists want the population subserviently bound within a failed economy and broken government that refuses response to our Constitutional responsibilities. Rather, disable everyone and remove Constitutional liberties and responsibilities. Force the masses to scrape by on nothing but Marxist propaganda that empowers the ruling class to deprive the populace more than feudalism or monarchies ever did. Just look at Obama and his brother. Obama takes without himself giving. Obama produces fraud and expects America to buy that as his qualification to become POTUS. Michelle with her education sponges a personal fortune from political alliances thieving from tax funds and from soaking the health care industry as a bloodsucking administrator while either neglecting responsibilities or coercing deprivation from everyone except her two daughters.

In contrast, look at John McCain and how he and Cindy provide not only for their immediate family that includes an adopted child from “the third world” now a McCain, but also McCain’s extended family and BEYOND THAT TO LEGITIMATE CHARITIES THAT PERFORM MIRACLES ON A GRAND SCALE FOR THE EARTH’S MOST NEEDY VICTIMS OF POVERTY AND POOR HEALTH. Cindy does not sponge her fortune from tax funds nor from the health care industry. Unlike the Kennedy bootlegging fortune that involved murders to amass and has evolved to endorse Obama, Cindy’s business has always been legitimate, pays taxes, provides secure employment and a public service in the market place. That she is a successful wife and mother, business and charity director, not an empty suit heiress, is to her great credit.

From those to whom much is given, much is expected.

Michelle Obama is just another abusive fraud.

Cindy McCain emulates the American Spirit of success, charity, and support for sacrifice as sons serve America.

A few trillion dollars in mortgage loans to deadbeats was just an “irritant” that never would have caused a ripple in the economy . . . yeah, right.

AZCoyote on November 1, 2008 at 9:24 AM

If the securities had been properly rated or if the banks hadn’t been leveraged 30-1 the credit crunch wouldn’t be the biggest story of the year and the Dow average wouldn’t have dropped 40% within a year. The problem with the 30-1 leverage is that a 3% increase in default rates wipes out 100% of principal.

Obama is going to be so busy picking winners and losers he won’t have time to do anything else. He wants to do it all, doesn’t he? If he does 10% of what he says he’s doing, he’ll be one busy … I was going to say “boy”, but that’s racist. Don’t want people to see what a racist I am. He’ll be one busy guy. How’s that. Whew. Dodged THAT bullet.

when BO assured her she doesn’t need to worry about media bias since Fox is fair and balanced.

Cross reference Obama en route to his 2nd choice America home from his 1st choice World Abroad home, talking for a rare moment with the media traveling with him on board, picking on the man from Fox News with the inference that in HIS CHOSEN presidency, the military will not have Fox News access.

I voted early and it felt good to pull the lever for big Mac. I feel the wind at our backs mates.

Barrack Marx Obama is going to put a hurting on this country. The good news is, since I’m not going to upgrade my TV if he wins, is that I won’t waste as much time watching TV. I can read some of the 100 classic books you’re suppose to read before you die.

It was articles like this that helped me convince a few people not to vote for the “o” on the one side and Bob Barr on the other.
I have said to a number of other like thinkers…it is our duty to expose this guy for what he really is…
I only wish this article had been available a few months ago…maybe i could have turned a few more.

Amen! I’ve always wondered how effective a “McSame” commercial putting the shoe on the other foot would be.

“Obama. More of the same energy plan that cost you $4 a gallon at the pump this summer.”

I’m sure it would’ve been a killer before the market went belly-up. Now it’s probably not hard-hitting enough–$100 at the pump every week doesn’t have the fear factor of thousands of dollars in savings lost in the blink of an eye.

Ideology over commonsense all the time. – Crux Australis on November 1, 2008 at 10:14 AM

It’s an old joke, but very true: when confronted with the obvious success of capitalism and free enterprise in any free society, the socialist academic is quick to respond, “All good and well, this capitalism of yours, but will it work in theory?”

In order to change the behavior of consumers, Obama argued, the government had to send “price signals” to deter bad decisionmaking … at least according to the Bureau of Acceptable Consumer Choices

David Frum actually advocates this as being a “conservative” position. The idea is that if gas is polluting the environment, you tax gas in an amount sufficient to recover remediation costs. That way, you are internalizing the cost of pollution, but you aren’t doing it with command & control.

The problem, of course, is that Obama isn’t trying to tie his gas tax scheme to any quantifiable amount of pollution remediation. Rather, he just wants everyone to take the bus, so they become more dependent on government (and thus on Democrats) for handouts.

O’Reilly thought he was manipulating her just as she proved he wasn’t with her aside laugh at him and her letting him play on Tina Fey without rejoining his interruption of her story.
maverick muse on November 1, 2008 at 9:46 AM

Fox News has no choice. If Obama wins, Republicans will be totally out of power and politically irrelevant. Fox’s ratings significantly suffered during the Dems’ primaries while the boycott of FNC was in effect. No doubt Obama will boycott FNC as well, unless FNC agrees to give him more favorable coverage.

On O’Reilly last night, though, he pretty much said he was a big fan of Palin and supported McCain… He usually doesn’t do that.

Obama just endorsed classic socialism in that video. Socialism comes to power by pitting the “haves” against the “have nots.” The formula is simple, create many giveaway programs for the “poor” to gain their vote and increasingly tax away the wealth of those who oppose your freedom destroying plan. Once there are enough Democrats in offices of power, they can do what they want and you have no rights.

When have we seen government send “price signals to change behavior” before? Oh, yes — in the lending markets. When government wanted more loans given to risky borrowers for political purposes, they sent “price signals” to lenders by having Fannie Mae and Freddie Mac buy up tons of subprime paper, and then mandated their conversion to securities to send “price signals” to investors.

Ed Morrissey

Just so we are all on the same page, here is the results from the last time the government sent price signals.

The market can only serve one master. If the consumer is the master, then the market will serve the consumer (i.e. all of us), and consumer needs and desires are met efficiently. In as much as the government is the master, the market will serve the needs of the government at the cost of the consumer, and the consumer needs and desires will not be met as efficiently. This inefficiency will take the form of shortages and higher prices.

These higher prices will consume far more of the consumer’s money than Barack Obama, in his most fantastic prediction, could ever return in a tax cut.

Ah, I’ve got it! Ground all campaign aircraft. That should send a signal that the Government is serious about reining in egregious demand!

gridlock2, the markets do not serve the consumer — the markets serve the markets. That’s why there are about ten brokers/factors between you and the producer of oil, some layers of which are related. Each layer is designed primarily to skim a bit of profit, and the skimmed profit comes out of your pocket. Remember Enron, and learn.

Free-market economists describe prices as transmitting signals between producers and consumers. When prices go up, they tell producers to make more, and consumers to use less. If government meddles with prices, it interferes with the signals, and bad things tend to happen. More here

Each layer is designed primarily to skim a bit of profit, and the skimmed profit comes out of your pocket. Remember Enron, and learn.

unclesmrgol on November 1, 2008 at 11:28 AM

By this hypothesis, the most efficient economic model would be complete vertical integration: the producers of goods would sell them directly to the consumers, and the producers would keep all the profits. So why would a producer allow intermediaries? Did the intermediaries insert themselves in the supply chain by force, or by doing something more cheaply than the producers could do it themselves?

If there were two competing producers, and they were competing only on price (that is, their product was otherwise indistinguishable), wouldn’t they want to select the most efficient means of converting raw materials into value in the hands of the consumer, so that they could afford to cut their price to below that being offered by the competition?

Now is the time for constant reminders that Obama loves high priced energy. There is an interview clip of him talking nicely about how $4 and $5 a gallon gasoline is good. That is “straight talk” the voting public can relate to. Sadly…….

A kossak at work said he likes the idea of socialism coming from an Obama administration. Too many people go for what sounds good on paper, well it sounds good until you think of the ramifications and actual historical experiences.

Remember that Obama wants to take money from the energy suppliers to give it to the poor to pay for the newly more expensive energy. More expensive because he took the money from the suppliers.

Because he’s a f****** idiot.

Either that, or he just wants the government to have its 30% cut of the process. And since, let’s be honest, the middle class won’t en up with the credit, he wants to screw the middle in the process of slapping around both ends.

Oh goodie… just in time for the next 30 yr freeze. I truly believe Obama wants his “Civilian Defense Force” to fight the revolt that he would surely inspire. Methinks Erica Jong might get her unpleasantness with an Obama win.